Correlation Between Cogent Communications and EAGLE MATERIALS
Can any of the company-specific risk be diversified away by investing in both Cogent Communications and EAGLE MATERIALS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cogent Communications and EAGLE MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cogent Communications Holdings and EAGLE MATERIALS, you can compare the effects of market volatilities on Cogent Communications and EAGLE MATERIALS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cogent Communications with a short position of EAGLE MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cogent Communications and EAGLE MATERIALS.
Diversification Opportunities for Cogent Communications and EAGLE MATERIALS
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cogent and EAGLE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cogent Communications Holdings and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS and Cogent Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cogent Communications Holdings are associated (or correlated) with EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of Cogent Communications i.e., Cogent Communications and EAGLE MATERIALS go up and down completely randomly.
Pair Corralation between Cogent Communications and EAGLE MATERIALS
Assuming the 90 days trading horizon Cogent Communications is expected to generate 1.46 times less return on investment than EAGLE MATERIALS. In addition to that, Cogent Communications is 1.16 times more volatile than EAGLE MATERIALS. It trades about 0.06 of its total potential returns per unit of risk. EAGLE MATERIALS is currently generating about 0.1 per unit of volatility. If you would invest 12,749 in EAGLE MATERIALS on September 2, 2024 and sell it today you would earn a total of 16,451 from holding EAGLE MATERIALS or generate 129.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cogent Communications Holdings vs. EAGLE MATERIALS
Performance |
| Timeline |
| Cogent Communications |
| EAGLE MATERIALS |
Cogent Communications and EAGLE MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cogent Communications and EAGLE MATERIALS
The main advantage of trading using opposite Cogent Communications and EAGLE MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cogent Communications position performs unexpectedly, EAGLE MATERIALS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EAGLE MATERIALS will offset losses from the drop in EAGLE MATERIALS's long position.| Cogent Communications vs. Calibre Mining Corp | Cogent Communications vs. FUYO GENERAL LEASE | Cogent Communications vs. MINCO SILVER | Cogent Communications vs. Apollo Investment Corp |
| EAGLE MATERIALS vs. BJs Wholesale Club | EAGLE MATERIALS vs. Caseys General Stores | EAGLE MATERIALS vs. American Public Education | EAGLE MATERIALS vs. Fast Retailing Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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